On May 13, 2015, the Court of Justice of the European Union (CJEU) delivered the highly anticipated ruling Gazprom. [1] The main issue of the case is whether Regulation 44/2001 may preclude the court of a Member State from recognizing and enforcing an arbitral award containing an anti-suit injunction. The purpose of paper is to analyze the case in light of the CJEU case law and the new Regulation 1215/2012. In so doing, it begins with a presentation of the background of the case. Then, it addresses the Gazprom case. Finally, it concludes with some comments on Regulation 1215/2012.
The Gazprom case involves Regulation 44/2001 and its relationship with the anti-suit injunction mechanism and arbitration. These elements are examined in turn.
A. Regulation 44/2001 in a Nutshell
Over the past decade, the European Union (EU) has adopted two sets of regulation on the rules governing the jurisdiction of courts in civil and commercial matters: Regulation 44/2001[2] (also referred as Brussels I) and Regulation 1215/2012[3] (also referred as Brussels I Recast), which repealed Regulation 44/2001 on January 10, 2015.
Their objective is to reduce and/or eliminate certain differences between national rules governing jurisdiction and recognition of judgment that hamper the sound operation of the internal market. In so doing these regulations seek to unify the rules of conflict of jurisdiction and to ensure rapid and simple recognition and enforcement of judgments given in a Member State through mechanism of automatic recognition and enforcement of judgments. [4]
B. Regulation 44/2001 and Anti-Suit Injunction
In parallel to these developments, arbitration as an alternative dispute resolution, has gained importance as cross-border trade significantly increased. Through an agreement, parties may decide to arbitrate instead of resolving their dispute before the national court of one party.
A problem may arise when one of the parties, despite an arbitration agreement, commence an action in a court. Based on legitimate or tactical (torpedo action) motivations, this parallel proceeding may result in high cost, inefficiency and delay. One way to prevent such action is for the court of the seat of arbitration to issue an anti-suit injunction.
Under English law, the anti-suit injunction is an order made by a court requiring a party to the jurisdiction of the court not to bring or advance particular claims before a national court or tribunal or arbitral tribunal established in another country.[5]
In the EU context, in Gasser[6] and in Turner[7], the CJEU held that anti-suit injunctions issued by a court of a Member State and directed against court proceedings in another Member State were contrary to Regulation 44/2001. More recently, in West Tankers, it held that, despite the express exclusion of arbitration of the Regulation 44/2001, an anti-suit injunction issued by a court of a Member State in support of arbitration was not compatible with the Regulation.[8]
This decision has been severely criticized. In particular, the English arbitration community argued that the West Tankers could jeopardize the position of the English arbitral forum, as without the safeguard of anti-suit inunction parties may be inclined to chose other forum than England as their seat of arbitration.[9] As a result West Tanker raised the question of the application of Regulation 44/2001 to arbitration.
C. Regulation 44/2001 and Arbitration
Article 1(2)(d) expressly excludes arbitration from the purview of Regulation 44/2001. However, the provision does not provide for further guidance on the precise scope of the exclusion.
The Anglo-Saxons and the continental Europeans have opposing views on the issue. [10] For the Anglos-Saxons, as soon as it is claimed that there is an arbitration agreement all dispute arising out the legal relationships are exclusively subject to arbitration. Accordingly, only the arbitral body and the courts at the seat are entilted to examine jurisdiction. In contrast, for continental Euopean lawyers, if the subject-matter on the case falls within the scope of the Regulation 44/2001, a court has jurisdiction to determine whether the exception under Article 1(2)(d) applies and, according to its assessment, decide whether it adjudicates the matter itself or whether it refers the case to the arbitral body. [11]
The CJEU adopted the continental European approach for the first time in Rich[12] and confirmed it in Van Uden[13] and West Tankers[14]. Accordingly, the fact that parties have entered into an arbitration agreement does not rule out the application of Regulation 44/2001, which depends on the substantive subject-matter of the case. For instance, if the claim is tort or contract damages, the subject-matter is covered by the Regulation, which should apply. In contrast, issues related to the selection of arbitrators, the choice of the seat of arbitration does not fall within the sope of the Regulation.[15]
Therefore the crucial question is not whether the anti-suit injunction is compatible with Regulation 44/2001. After West Tanker, we know, it is not. Rather it is to determine whether Regulation 44/2001 is applicable or not to the case. If yes, the injunction would breach EU law and should not be taken into consideration. Conversely, if Regulation 44/2001 would not apply, the validity of the injunction should be assessed in the light of other legal instruments.
The case concerned a Lithuanian company, Lietuvos diju AB, whose main business consisted in buying gas from Gazprom OAO, conveying and distributing it in Lithuania. The main shareholders of the company concluded a shareholder agreement, which contained an arbitration clause. Later on, one shareholder, the Ministry of the Lithuanian State (the Ministry), made an application to Lithuanian regional Court against the activities of the other shareholders. Another shareholder, Gazprom, took the view that the application had breached the shareholder agreement and filed a request for arbitration in which it sought an order to the Ministry to discontinue the proceedings before the regional court. The arbitral tribunal agreed partially with the claim and ordered the Ministry to withdraw or limit some of the claim it brought before the regional Court. However, the Ministry maintained its claim before the regional Court, which order the initiation of the investigations. Gazprom applied to the Court of Appeal in Lithuania for the recognition and enforcement of the arbitral award. The Court of dismissed the claim. The decision went before the Supreme Court of Lithuania, which in turn submitted the CJEU a request for a preliminary ruling regarding the recognition and enforcement of the arbitration award.
The case gained momentum with the opinion of the Advocate General Wathelet, in which he submitted that West Tankers should be overturned and arbitration law should automatically prevail over EU rules of jurisdiction (hence favoring the Anglo-Saxon approach).[16] While his argumentation is debatable, it aroused the hope for some lawyers that arbitration will be completely excluded from the scope of Regulation 44/2001. [17]
After excluding the application Regulation 1215/2012 (because the facts of the case took place prior to its entry into force), the CJEU addressed two issues: whether an arbitral award prohibiting a party from bringing a claim before a national court is contrary to Regulation 44/2001; and whether it is compatible with the Regulation 44/2001 for a Member State’s court to recognize and enforce an arbitral award ordering a party to limit its claim before a court of that Member State is compatible with that regulation.
In the first part of the ruling, the CJEU recalled and reaffirmed its jurisprudence on arbitration and on the anti-suit injunction under Regulation 44/2001. It mentioned that arbitration is excluded from the scope of Regulation 44/2001, unless the subject matter of the dispute falls within the scope of the Regulation. Then it recalled that an anti-suit injunction issued by a Court of a Member State restraining a party – to a proceeding or to arbitration proceeding – not to proceed or continue proceeding before a court of another Member is not compatible with the Regulation 44/2001.[18]
Then, in the second part of the ruling, the CJEU held that the issue at hand is not whether an injunction issued by a Court is compatible with the Regulation 44/2001, but whether the recognition and the enforcement of an arbitral award ordering a party to limits its claim before a court of that Member State is compatible with that regulation. The CJEU went on holding that the Regulation 44/2001 does not govern the recognition and the enforcement of an arbitral award. It held that this issue is rather covered by the national and international law applicable in the Member State. In particular, it suggested that the relevant instrument is the New York Convention. [19]
In light of the foregoing it can be concluded that despite the opinion of the Advocate General, the CJEU reaffirmed its case law, with notably West Tanker. It remains to be seen whether this jurisprudence is consistent with the recently adopted Regulation 1215/2012.
IV. Arbitration under Regulation 1215/2012
As mentioned earlier, Regulation 1215/2012 repealed Regulation 44/2001 on January 10, 2015. It contains two provisions, which specifically deals with arbitration. Article 1 (2) (d) excludes arbitration from the scope of the regulation adopting the wording from Regulation 44/2001. Article 73(2) underlines that the Regulation does not affect the application of the New York Convention. In addition, the Regulation features recital 12, which seeks to clarify its relationship with arbitration. It includes 4 paragraphs that have to be read in line with CJEU case law.
Recitals 12 (1) and (4) remind some well-established principles. Recital 12 (1) deals with the jurisdiction of Member States Court with respect to arbitration. It recalls that the Regulation does not prevent them from taking any measures related to arbitration proceeding in accordance to their national law, such as referring the parties to arbitration, staying or dismissing the proceeding or examining whether the arbitration is null and void, inoperative or incapable of being performed. Recital 12 (4) points out that arbitration-related court proceedings are excluded from the scope of the Regulation.
On the other hand, Recitals 12 (2) and (3) bring some changes. Recital 12 (2) mentions that a ruling by a Member State court on the validity and existence of an arbitration agreement, as principal issue or as incidental question, is not subject to rules of the Regulation. In contrast, according to the CJEU case law, when the subject matter of the case falls within the scope of the Regulation, the decision on the validity and existence of an arbitration agreement as preliminary issue is subject to the Regulation. As a result, following recital 12(2), the ruling of a Member State court on the validity and existence of an arbitration agreement would not circulate within the EU under the term of the Regulation, regardless of the subject matter. This will leave the party who relies on the arbitration agreement, to seek freely a ruling on the validity and existence of an arbitration agreement before other Member State’s court.
Recitals 12 (3) provides nevertheless that the judgment on the merit rendered by the first court, while it had determined that the arbitration agreement is invalid as preliminary issue, falls within the scope of the Regulation and can be recognized within the EU. However, Recitals 12 (3) stressed that the New York Convention takes precedence over the Regulation. This means that if an arbitral award is rendered on the same issue as a Member State court’s judgment, other Member States court should recognize the arbitral award first.
It results from the foregoing that the new Regulation does not change the situation of the anti-suit injunction. At the same time, the recognition of the precedence of arbitration awards over Member State court judgments may arguably rebalance the rejection of the anti-suit injunction mechanism. First, following the CJEU ruling in Gazprom, an anti-suit injunction in an arbitral award rather than in interim relief falls within the scope of the New York Convention. Second, in the event of two competing proceedings on the same issue –one before an arbitration tribunal, the other before a national court– the recognition of the arbitration award takes precedence over the recognition of the national court judgment, which may dissuade the party to start a parallel proceeding despite the existence of an arbitration agreement.
The CJEU in Gazprom addressed the issue of whether Regulation 44/2001 may preclude the court of a Member State from recognizing and enforcing an arbitral award containing an anti-suit injunction. The case was highly anticipated by those who had hoped that the CJEU would reverse its jurisprudence on anti-suit injunction developed in West Tankers.It is submitted that the underlying issue in Gazprom was rather on the extent of the relationship between Regulation 44/2001 and arbitration. This latter has been the subject of an intense debate between the Anglo-Saxon and the continental European approach.
In Gazprom the CJEU reaffirmed its case law: anti-suit injunction in support of an arbitration is not compatible with Regulation 44/2001 if the subject matter falls within the purview of the Regulation, endorsing hence the continental European approach. At the same time, it held that the same measure contained in an arbitration award falls outside the scope of the Regulation, which is rather covered by the New York Convention.
Regulation 1215/2012 repealed Regulation 44/2001. It integrates the same elements of the previous Regulation on arbitration, while adding some elements. In particular, it is submitted that Regulation 1215/2012 enshrines the precedence of the New York Convention, which could mitigate the impact of the rejection of the anti-suit injunction.
Gilles Muller
[1] Judgment of the Court of 13 May 2015, Gazprom, C-536/13, ECLI:EU:C:2015:316.
[2] Regulation (EC) No 44/2001 of the Council of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2001 O.J. (L 12) 1.
[3] Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, 2012 O.J. (L 351) 1-32.
[4] Id., Rec. 4.
[5] Opinion of Advocate General Wathelet of 4 December 2014, Gazprom, C-536/13, ECLI:EU:C:2014:2414, at 63.
[6] Judgment of the Court of 9 December 2003, Gasser, C-116/02, ECLI:EU:C:2003:657.
[7] Judgment of the Court of 27 April 2004, Turner, C-159/02, ECLI:EU:C:2004:228.
[8] Judgment of the Court of 10 February 2009, West Tankers, C-185/07, ECLI:EU:C:2009:69.
[9] Daniel Rainer, The Impact of West Tankers on Parties’ Choice of a Seat of Arbitration, 95 Cornell L. Rev., 431 (2010); Jae Sundaram, Does the Judgment of the CJEU in Gazprom Bring About Clarity on the Grant of Anti-suit Injunction Under the Brussels I Regulation?, 27 Denning L. J., 303 (2015).
[10] Margaret Moses, Arbitration/Litigation: The European Debate, 35 Nw. J. Int’l L. & Bus.1, 1 (2012).
[11] Opinion of Advocate General Kokott of 4 September 2008, West Tankers, C-185/07, ECLI:EU:C:2008:466, at 39-45.
[12] Judgment of the Court of 25 July 1991, Rich, C-190/89, ECLI:EU:C:1991:319, at 26.
[13] Judgment of the Court of 17 November 1998, Van Uden, C-391/95, ECLI:EU:C:1998:543, at 33-34.
[14] West Tankers, supra note 8, at 22.
[15] Opinion of Advocate General Kokott, supra note 11, at 48.
[16] Opinion of Advocate General Wathelet, supra note 5, at 157.
[17] Trevor C. Hartley, Antisuit Injunctions in Support of Arbitration: West Tankers Still Afloat, 64 ICLQ 4, 965 (2015).
[18] Gazprom, supra note 1, at 28-34.
[19] Id., at 35-44.